The Italian police raided some of LVMH’s Dior suppliers, who make one of the most popular luxury handbags on the market. Italian prosecutors discovered that Dior paid an amount of $57 (R1,043) to produce bags that retail for $2,780 (R50,0871).
LVMH supplies brands such as Louis Vuitton, Bulgari, Fendi, Givenchy, Guerlain, Kenzo, Marc Jacobs, Tiffany & Co, Moët & Chandon, Veuve Clicquot, Krug, Dom Pérignon, Maison Ruinart and Le Bon Marché.
According to media reports, judges placed both Dior and Armani units under judicial administration for one year. The two Italian luxury giants are reportedly accused of paying just a small amount to produce handbags that retail for thousands of dollars.
Investigation by Italian authorities
This is according to documents that were discovered in a sweeping investigation of subcontractors. Italian prosecutors in Milan investigated the LVMH subsidiary Dior’s use of third-party suppliers in recent months.
Prosecutors said these companies had exploited workers to pump out bags for a small fraction of their store price. Authorities examined documents on the items. They showed that last month Dior paid a supplier. But the costs did not include raw materials such as leather.
According to Reuters, a certain unit of Dior failed to adopt the appropriate measures. These are measures to check the actual working conditions or technical capabilities of the contracting companies.
Poor working conditions, violations of labour laws
Investigators found evidence that workers were sleeping in the facility so that bags could be produced around the clock. They also tracked electricity-consumption data, which showed work was being carried out during nights and holidays, the report said.
The subcontractors in question were Chinese-owned firms, prosecutors said. They said most of the workers were from China. Two of them live in the country illegally, and another seven are working without required documentation.
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